Ways in Which the Government Can Help to Control House Prices

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MATRIC NO.: MB111105

Based on the two articles (source: The Star, 10 October 2010, Focus page F24 & F26), Case study 3 requires the reviewer to suggest ways to which the Government can help to control house prices although there are various factors that contributed to the rise of affordable housing. Argue your case critically and creatively. The source and nature of your literature will be very helpful in presenting your case including the depth of your review of the literature. Literature Review

Housing affordability is one of the key factors that can describe the socioeconomic stability and development of a country. Housing affordability is aimed to ensure the housing provided is affordable by every income earner group whether low-income, middle income and high income group.

With economic activity chugging away and jobs still are being created, more so when economic programmes by the Government start to see more investment and employment being created throughout the country, demand for housing in the hot markets will be on the rise. Unfortunately, most of the homes being launched are beyond the reach of many Malaysians, especially those who are early in their careers, and the gap is set to widen as a larger percentage of Malaysians enter the age of employment year after year.

Given the desire for developers to obtain as much profit from their landbank, the vast majority of Malaysians will be priced out and just cannot afford to shell out that kind of money to buy a house, regardless of how big or how good the developer is, and at the same time keep up with the escalating cost of living. It therefore comes to no one's surprise that the Government is now looking to step in and fulfil that demand gap by coming up with two affordable housing schemes ranging between RM100,000 and RM300,000 for Malaysians who do not yet own a home. Both those schemes which will cater for households earning under RM3,000 a month and RM6,000 a month, which together would form the bulk of Malaysians today.

“Home prices have gone up so much that it has reached a ceiling to the point that high-end housing developers must give a 20% rebate in the condominium segment or there will be no sales,” quoted by Yeow Thit Sang (President International Real Estate Federation (Fiabci) Malaysia). House prices have gone up many times beyond the average household income. The scenario of low-occupancy and falling prices can be found in KL City Centre and Mont’Kiara. Overall, developers need to slow down, adding to that KL Sentral is another area where office and retail properties are undergoing continuous development. The Housing and Local Government Ministry and the relevant authorities can play a greater role in controlling prices. They can do this by studying the needs of the market – the take-up rate, the number of people entering the Klang Valley to seek employment, the number of expatriate entering or leaving the country, and which type of housing is facing a shortage. In London, Hong Kong, Singapore, China and Australia, the authorities will study the housing needs of cities. Currently, this is being done on a five-yearly basis, which is far from the ideal.

The need for housing to be priced in the medium range of about RM300,000 because this is what the average wage earner can afford even in the Klang Valley. However, it is difficult to find houses with this price in the Klang Valley or Penang and this is worrying. The most pressing issue now is escalating prices and the question of affordability among the ordinary wage earners. The housing sector is very much associated with the economic health and wealth of a nation. A high demand for housing would trigger growth in many other economic sectors. Thus, research into the...
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